The personal representatives (PRs) of an estate would be personally liable, up to the value of the estate, for liabilities incurred by the deceased person. Such liabilities would include contingent liabilities for which no claim has yet been made.
The PRs may be able to protect themselves by publishing a notice which complies with section 27 of the Trustee Act 1925 but where PRs know of a future liability, they receive no protection under TA 1925, s 27 and should set aside a fund to meet the liability.
Where a contingent liability might arise, but the PRs have not actually received a claim for such liability, the PRs could:
- Estimate the amount of the possible liability and set aside an appropriate amount, distributing the rest of the estate.
- Distribute the whole estate subject to an agreement from the beneficiaries to indemnify them should the liability actually materialise although any indemnity may be ultimately of little value depending on the beneficiaries’ circumstances.
- Arrange suitable insurance cover and distribute the whole estate.
- Apply to the court for directions.
Depending on the circumstances of the potential claim, the executor could apply to the court to sanction a distribution from the estate without liability for a potential claim, pursuant to the principle in Re Yorke, which related to a deceased Lloyds name whose estate would have suffered claims and potential future claims relating to Lloyds risks. Such a distribution may not absolve the legatees of the estate from a claim against the funds received.
If you would like a chat to discuss further, please feel free to contact me for a free 30-minute consultation.
Sophie Campbell
01637 800 306
